The new government that takes office post May 23 is set to be pleasantly surprised. Sources told ETNow that the Bimal Jalan panel, reviewing the economic capital framework, is likely to recommend lowering of RBI reserves.The amount of reserves the central bank can keep was a contentious issue between the government and RBI, which les to the stepping down of former RBI governor Urjit Patel in December last year.“The panel’s recommendations will balance the issue of growth and monetary function. Immediate transfer could be inflationary in nature,” the source said.“As long as the recommendations are prospective in nature and not retrospective, the consequences of the recommendations of the Jalan panel should not be too difficult to handle. "The panel was set up as discussion on the reserve issue has been pending for years. We are not saying give the funds to us and we will tell you how should the funds be used, but discussions on monetary and fiscal issues are important," the second official said.

Source: Economic Times May 07, 2019 09:00 UTC